Canadian housing market to moderate in 2019 but growth to continue in Ontario and Toronto

By Wayne Karl

Canada’s housing market should see a moderation in both housing starts and sales, while home prices are expected to reach levels that are more in line with economic fundamentals such as income, job and population growth. This forecast for 2019 and 2020 is drawn from the 2018 Housing Market Outlookfrom the Canada Mortgage and Housing Corp. (CMHC).

Source: CMHC Housing Market Outlook

Nationally, CMHC’s outlook for 2019 projects total housing starts to edge down and range between 193,700 to 204,500, with the downward trend expected for both single and multi-unit starts. MLS sales are expected to be between 478,400 and 497,400 units annually while MLS prices should lie between $501,400 and $521,600.

“Our key takeaway from this year’s outlook is moderation in Canada’s housing markets for 2019 into 2020,” says Bob Dugan, chief economist, CMHC. “Housing starts are expected to decline from the higher levels we’ve seen recently. We expect resales in 2019 and 2020 to remain below recent peaks while prices should reach levels that are more in line with economic fundamentals such as income, job and populations growth.”

Ontario recovery

After dampened market activity in 2018, existing home sales and housing starts in Ontario, particularly in single-family homes, will post a partial recovery in 2019. Buyers are expected to re-enter the market on the strength of stronger than expected job growth and in-migration, before the downward trend in starts and sales resumes in 2020.

Source: CMHC Housing Market Outlook

GTA growth

With balanced conditions prevailing in the GTA, CMHC expects moderate sales growth and home prices growing in line with inflation. The rising costs of homeownership will result in strong rental demand, while new supply will add some upward pressure on vacancy rates. Toronto buyers should see more housing choices as builders concentrate their efforts on new highrise projects.

OTHER REGIONAL HIGHLIGHTS

BRITISH COLUMBIAHousing starts activity and MLS sales in BC should moderate, as economic and population growth slows while MLS average prices are expected to see a flatter growth profile through 2020.

VancouverOver the next two years, Metro Vancouver’s resale market will see lower sales, higher inventories of homes for sale and lower home prices compared with recent market highs. Through 2018, demand and home prices softened across all market segments and local geographies.

PRAIRIESBuyers’ market conditions in Alberta and Saskatchewan should gradually shift to a balanced market with gradual improvement in economic and demographic fundamentals. Balanced market conditions in Manitoba are expected to continue.

CalgaryVarious factors will push and pull the demand for housing in Calgary in 2019 and 2020. Calgary’s economy will experience stronger growth in population and employment. This will help support demand and lift sales in 2019 and 2020. However, the average MLS price will continue to face downward pressure but is expected to stabilize in 2019 and modestly rise in 2020.

QUEBECHousing starts and sales of existing homes will both be sustained, however, slower economic growth and rising borrowing costs will moderate activity through 2020. Starts will continue to be dominated by the apartment market segment, while demand for resale single-detached homes will remain relatively strong.

MontrealIn 2018 and 2019, rental housing demand will increase slightly faster than supply in Montreal, which will put some downward pressure on the vacancy rate. Demand will be supported by rising net migration over the forecast horizon.

ATLANTIC CANADAThe Atlantic region will see sustained activity, notably in Nova Scotia, where existing home sales and average prices should trend higher while rental demand will drive growth in apartment construction.

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Real Estate Sales: 2017 Year-End and 2018 Forecast

In the GTA, 2017 set a record high in new condo apartment sales and a record low in single-family home sales

In the GTA new home market, 2017 was a year of declining inventory, high prices and strong sales, setting a record high in new condo apartment sales and a record low in single-family home sales, the Building Industry and Land Development Association (BILD) announced January 26, 2018.

Overall in 2017, there were 44,143 new homes sold in the GTA, according to Altus Group, BILD’s official source for new home market intelligence. That makes 2017 the fourth strongest year for new home sales in the GTA since Altus Group started tracking in 2000. Only 2002, 2011 and 2016 had stronger new homes sales, with 2002 being the highest at 53,660 units sold.

Of the new homes sold in 2017, 82.5 per cent (36,429 units) were condominium apartments in low, medium and highrise buildings, stacked townhouses and loft units, the highest number of condo apartments sold in any year in the GTA, while 17.5 per cent (7,714) were single-family homes, including detached, link, and semi-detached houses and townhouses (excluding stacked townhouses), the lowest number sold since Altus Group started tracking in 2000.

“Low inventory and escalating prices across the board are behind the highs and lows of the sales numbers we saw in 2017,” said David Wilkes, BILD’s new president and CEO. “Our industry wants to build new homes to increase the housing supply in the GTA, but we need municipalities to work with us to expedite the process by simplifying the development approval process, updating zoning by-laws to align with provincial policies and servicing developable land with critical infrastructure.”

The supply of new housing is typically measured by the number of new homes available for purchase in builders’ inventories at the end of the month and includes units in pre-construction, under construction and completed projects. At the end of December 2017, there were 11,397 new homes available for purchase, down 13.2 per cent from 13,136 at the end of December 2016 and 60.3 per cent below the 28,739 new homes available 10 years ago. Since 2000, the total inventory at the end of each month has typically been between 20,000 and 30,000 units. For over a year and a half now, it has been below 20,000 units.

The decline in single-family home inventory has been even more dramatic. At the end of December 2017, there were 3,481 new single-family homes available for purchase, down 74.4 per cent from 10 years ago.

New home prices rose again in December 2017, with the benchmark price for available new single-family homes at $1,225,774, which was 23.2 per cent above last December’s benchmark price of $995,116. Meanwhile the benchmark price for available new condo apartments was $716,772 in December, 41.3 per cent above the December 2016 benchmark price of 507,128.

“While many end user buyers have been looking to the new condominium apartment sector for more affordable homes, some are now starting to be priced out of this segment as well,” said Patricia Arsenault, Altus Group’s executive vice president of Research Consulting Services.

Wilkes said BILD will be raising issues of housing supply and affordability as the municipal elections approach this fall.

“As the GTA prepares for unprecedented growth, we must get this right to ensure the region continues to be one of the most dynamic and vibrant places to live,” he said. “We are calling on governments at all levels to ensure that people who choose to live in the GTA can afford to purchase a new home.”

Robust Activity Will Continue In 2018

The “2018 GTA Flash Report,” which provides a comprehensive review of the real estate market in the GTA based on 2017 data, was released January 26, 2018 by the Altus Group. The report highlights another record-breaking year for total investment property sales volumes, and looks at the performance of commercial leasing, land and residential sectors in the GTA.

Investment property sales, including land sales, as well as sales of office, retail, industrial, hotel and rental apartment properties, reached a total of $23.5 billion in 2017, a 38 per cent increase from 2016 and a record for the seventh consecutive year. Residential land sales contributed a record $8.5 billion to the total, up $2.8 billion over 2016.

In the office-leasing sector, the GTA-wide office vacancy rate fell in 2017 to 8.9 per cent (including vacant but leased space), even with the completion of 13 new office buildings that have added two million square feet of inventory. Most of the new office supply under construction is in the downtown submarket, where the vacancy rate at the end of 2017 was below 6 per cent.

Turning to the new home sector, Altus Group’s data shows that total new home sales in the GTA reached just over 44,000 units in 2017, the fourth highest level on record. New condominium apartment sales, which includes apartments in low, medium and high-rise buildings, lofts and stacked townhouses smashed the previous annual record set in 2016 with just over 36,400 units in 2017.

“Altus Group data show that homebuying intentions remain strong in the GTA, despite the many roadblocks that have been put in potential buyers’ way due to factors such as price escalation in recent years, rising interest rates, tighter lending criteria and additional stress testing,” said Matthew Boukall, senior director at Altus Group.

The buoyancy in the GTA real estate sector in 2017 is poised to continue this year according to Altus Group experts. Below are key predictions for 2018:

Office shared work spaces: The trend of renting workstations within a larger office space will grow in the GTA as low vacancy rates lead to higher rents. Look for this segment to grow not just in the downtown market, but throughout the GTA, as employers look to accommodate staff pushed further out in search of more affordable housing options.

Land sales: Residential land sales are expected to be strong in 2018, although higher prices and various policy changes have introduced more uncertainty to the land market. High-demand areas are likely to remain expensive, which could push some developers to seek more affordable options outside traditional core areas.

New homes market: New condominium apartment sales are expected to remain elevated in 2018. However, surpassing 2017 levels will be a challenge. While investor interest continues to be strong, some end user buyers who have been looking to the new condominium apartment sector for more affordable homes are now starting to be priced out of this segment as well. Some modest increase in new single-family sales is possible, however sales in this segment will continue to be challenged by lack of available product, in particular options that are affordable to a broader range of buyers.

Industrial and Retail: Demand for industrial space will remain strong as online and traditional retailers seek warehouse space to support their e-commerce business strategies. Retailers will continue to shrink their brick and mortar footprint and traditional retail space will continue to evolve as retail centres focus on consumer experiences, especially food themes, to draw in traffic.

Investment Property: Investor appetite will remain strong in 2018. With interest rates moving up, there is potential for some shift away from debt-financed buyers toward more cash-focused institutional buyers.

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Created by fusion of exceptional design, superior quartz quality and cutting-edge technology, HansStone Quartz weaves together intriguing patterns and colours inspired by the diverse Canadian landscape.

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X-Tile is sure to have whatever you need to express your unique individual style. We offer you an exceptional variety of wall and flooring options in ceramic, porcelain, natural stone, glass, mosaic and much more from leading suppliers around the world. Let our knowledgeable and friendly staff help you in your dream renovation or building project.

With over 90 years of experience, BLANCO is the leading kitchen sinks and faucets manufacturer. From handcrafted in Germany Steelart® sinks and the beauty of Silgranit®, to the European design faucets, BLANCO products are celebrated worldwide for their unmatched quality and design. Blanco Silgranit® sinks are proudly manufactured in Canada TRADE ONLY.

We've been proudly serving the community for more than 160 years. We deliver natural gas safely and reliably to two million homes and businesses across Ontario. With safety as our ongoing priority, we're committed to making communities better places to live.

Fisher & Paykel incorporates the world’s most innovative technologies and produce the most technically advanced, efficient and contemporary styled appliances. DCS created the first line of high end, commercial quality appliances and expanded to pioneer indoor and outdoor kitchen solutions for the at home chef. TRADE ONLY.

Fusion Stone is an easy and budget-friendly way to beautifully upgrade your home, inside and out. A patented Shouldice innovation, Fusion Stone is a thin stone veneer that is easily installed with the included stainless steel clips & screws. You just screw it to the wall and it’s “Hooked for Life”.

Through our customer feedback, we have learned the importance of ‘service’. You said and we listened. We addressed your needs and improvised; bringing you services and quality no one in the industry offers.

Since 1989 Men At Work has specialized in renewing and enlarging older houses in core Toronto neighbourhoods. We are experts in managing the challenges of renovating sensitive old buildings into beautiful, functional, comfortable living spaces.

Cosentino is a global, family-owned company that produces and distributes high value innovative surfaces for the world of architecture and design, leaders in their respective segments such as Silestone® Quartz surfaces and Dekton® Ultracompact surfaces. Technologically advanced surfaces that create unique designs for the home and public spaces.

Euro-Line Appliances has brought elite European engineered appliances to Canadian homes for over 25 years. Our brands exceed expectations and have earned awards in design, engineering, performance, and energy efficiency. All of our cooking, refrigeration, dishwashers, and laundry appliances are created to conserve our non-renewable resources.

SFA SANIFLO INC. (“SANIFLO”) is the only manufacturer of its kind in North America offering a complete line of macerating toilet systems for residential and light-commercial applications where installation of plumbing fixtures with below-floor drainage is impossible or cost-prohibitive.

Established in 1987, Caesarstone pioneered the original quartz surface and continues to be a leading developer and manufacturer of premium surfaces. Highly functional and design forward, Caesarstone surfaces have endless application possibilities including kitchen countertops, bathroom vanities, wall paneling, furniture and more.

Euro-Line Appliances has brought elite European engineered appliances to Canadian homes for over 25 years. Our brands exceed expectations and have earned awards in design, engineering, performance, and energy efficiency. Euro-Line Appliances are proud distributors of products from AEG, LIEBHERR, PORTER&CHARLES, SMEG, and FRANKE in Canada.

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